The employment practices liability insurance industry has never sailed on smooth seas, and the near future of the market is no different.
The employment practices liability insurance industry has never sailed on smooth seas, and the near future of the market is no different. Under mounting lawsuits and legislation triggered by workers increasingly understanding their rights in the dilemmas of a changing world, the EPLI market is poised to harden.
EPLI companies continue to seek 5-15% increases in rates, according to Hylant’s First Quarter 2020 Market Report. After the impact of the #MeToo movement on social and workplace climate, Hylant points to hastily settled lawsuits as a driver of increasing settlement amounts and warns that companies’ rush to dodge bad press may lead to “uncovered or partially covered claims—and may impact premiums and retentions in the latter half of 2020 and beyond.”
“If you look at the median verdict in an employment practices liability case since 2015, it has increased from $83,000 to $200,000,” says Chris Williams, EPL product manager at Travelers. “The average verdict increased from $337,000 to $675,000 from 2015 to 2018. That’s a pretty big jump in a short amount of time.”
In the fluctuating EPLI market, one trend to keep an eye on is an increase in settlement amounts for pregnancy discrimination claims.
From 2010 to 2018, the yearly average recovery amount by the Equal Employment Opportunity Commission for pregnancy discrimination lawsuits was $17 million. In 2019, that number jumped to $22.4 million.
“Generally, what drives that is a lack of understanding by some employers on what their obligations are under the law,” Williams says. “This may also go along with the #MeToo movement in that workers are more aware of their rights in the workplace and more comfortable pursuing claims. And it could be part of the social inflation that we’re seeing in the overall EPLI book.”
Increasing age discrimination claims is another EPLI trend, according to Hylant, especially as the U.S. workforce continues to age.
In the next four years, a quarter of the U.S. workforce will be 55 and older, according to the 2019 Hiscox Ageism in the Workplace Study. The Age Discrimination in Employment Act (ADEA) protects workers 40 and older from age discrimination.
One-fifth of Hiscox’s survey respondents said they had faced age discrimination. However, only 40% of respondents to Hiscox’s survey who say they experienced age discrimination actually filed a complaint. Over half of witnesses to age discrimination did not report it. Even with underreporting, between 2010-2019, employers paid a total of $886 million to settle age discrimination charges filed with the EEOC.
Pregnancy discrimination and age discrimination are the tip of the iceberg. Other concerns include “several pending Supreme Court decisions—most notably LGBTQ rights in the workplace—and an increased frequency in sexual harassment claims,” according to Hylant.
“If you’re an employer today, complying with the law, and not just federal law but state and municipal law, is challenging,” Williams says. “There are bans in some jurisdictions where employers can’t ask applicants for their salary history; case law varies by state as to what action an employer may take if an employee or applicant tests positive for marijuana usage outside of the workplace. All these things create even more compliance challenges for employers.”
AnneMarie McPherson is IA news editor.